Both Indonesia and the Netherlands have acknowledged that climate change justifies long term abatement strategies. Consequently, both countries signed in 1997, as a first step, the Kyoto Protocol. This protocol, which came into effect in 2005 with the ratification by the Russian Federation, introduces obligations on the reduction of greenhouse gases emissions for industrialized countries, such as the Netherlands. It also provides for  innovative market mechanisms, such as the Clean Development Mechanism (CDM), which allows industrialized countries to fulfil their commitments partly by participation in environmentally sound projects hosted by developing countries. For the time being only an overall reduction of approximately 5% for industrialized countries could be agreed upon in the Kyoto Protocol, while developing countries are exempt from emission reduction commitments.

The objective of the CDM is three-fold:

1. Allowing developing countries to achieve sustainable development;
2. Preventing dangerous interference with the climate system in developing and industrialized countries;
3. Allowing industrialized countries to achieve their emission reduction commitments.

The Netherlands attaches great importance to the global combat against climate change with the application of market-driven instruments. The Kyoto Protocol stipulates that the Netherlands reduces 200 million tonnes of its greenhouse gas emissions by 2012. In addition to its national abatement programme, the Netherlands established its CDM Purchase Programme already in 2001. According to this programme, emission reductions can be purchased by means of the CDM, hence allowing the Netherlands to comply with its reduction commitments under the Kyoto Protocol.

As such the Netherlands became the first country in the world which allocated a state budget (€ 450 million earmarked) for these purchases. Purchases of emission reductions are done through public procurement tenders (CERUPT, executed by the Netherlands’ governmental agency SenterNovem) as well as purchase agreements with well experienced international and national financial institutions, such as the World Bank, IFC and Rabobank.

In addition to these approaches the Netherlands entered into a formal CDM cooperation with Indonesia on 22 February 2005. The MoU signed at that date aims at producing at least 2 million tonnes of greenhouse gas emission reductions, resulting from projects in Indonesia in the field of renewables (in particular in  the field of biomass and geothermal energy), energy efficiency (gas flaring), solid waste treatment and transport. An overall implementing role has been identified for the country office of the World Bank in Jakarta with substantial involvement of Indonesian consultants.

The establishment of a biomass industry, which could produce biomaterials, such as biodiesel may be very beneficial for countries such as Indonesia. In addition, the development of biodiesel from oil plants may also have a significant impact on the CDM potential of Indonesia. The remaining challenge for the international community is to agree on a methodology to assess the emission reductions resulting from such CDM projects.

In addition, CDM projects aim to contribute to sustainable development, a key issue in both Indonesian environmental policy and Netherlands development cooperation policy. Furthermore, the transfer of CDM payments by the Netherlands to Indonesia may attract foreign direct investment.

If you wish to have more information on the bilateral cooperation in the field of CDM, please contact  jak-ea@minbuza.nl.